The Influence of Managerial Ownership and Institutional Ownership on Agency Costs (Studies on Manufacturing Companies in The Basic Industrial and Chemical Sectors Listed on The Indonesia Stock Exchange)

Ramon Arthur Ferry Tumiwa,Nova Christian Mamuaya

doi:10.32535/ijabim.v3i1.78

Abstract

The purpose of this study is to examine and analyze: (1) the effect of managerial ownership on agency costs, (2) the effect of institutional ownership on agency costs, and (3) the effect of managerial ownership and institutional ownership simultaneously affect to agency costs. This research was conducted at the primary industrial sector and chemical of manufacturing companies that listed on the Indonesia stock exchange 2014-2016. The companies analyzed amounted to 18 companies determined based on sampling criteria. The analysis method used is panel data analysis by using Eviews 9 programming computer. The results of this study found that managerial ownership has an insignificant relationship with agency cost. The institutional ownership has an insignificant with agency costs. The managerial ownership and institutional ownership have no significant effect on agency costs, simultaneous.

Highlights

The current business development is so competitive that it makes most public companies separate the relationship between the parties that provide capital to the company with the parties that managing company
The low average Selling and General Administrative (SGA) Expense states that the companies study samples have a low average agency cost
Managerial Ownership has an insignificant effect on agency costs

Summary

Introduction

The current business development is so competitive that it makes most public companies separate the relationship between the parties that provide capital to the company with the parties that managing company. The separation of this relations is known as the agency relationship, the relationship that occurs when one party, in this case, is called the principal (owner) uses another party called the manager (agent) to manage the company for the benefit of the owner. The manager is a party that seeks to maximize selfinterest. The agency conflict between the principal and the manager (agent) causes the principal to issue a number of costs called agency cost (Jensen and Meckling (1976); Roshanawaty (2012); and Tumiwa (2013))

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